The GameStop phenomenon

[KateR]

well that should get the thread locked lol

[Spiral]

I don't see why it should, to be honest, unless you're prompting it to be locked. There's certainly no abuse, and any loosely political statement is very much in keeping with the topic. To be honest, I'd rather my post be deleted than the thread be locked if it's problematic, but I honestly can't see how it's a problem.

[Dante.El.Chunk]

Yes, and when the financial sector was bailed out to the tune of hundreds of billions with the aim of encouraging them to help get the economy going again they totally put in into communities, and didn't at all pump it into the stock market and watch as wealth inequality exploded to levels not seen in centuries, as people so downtrodden, so desperate at the state of their lives turned to fascism as a last ditch grasp at hope, but now a few folks investing their own money (which may of may not be from their stimulus cheques) to make a few hundred dollars, now that is most definitely cause for concern, and regulation is needed, and wouldn't it be wonderful if folks worked together and blah blah blah. Come off it, mate.

This is bang on.

To add, The whole point of money is that it brings choice. If someone put their pittance of a stimulus cheque Into a stock, fair play.
Also, How in the hell would anyone know who spent which money on what? A lot of misinfo can be unpicked with a bit of logic.
This little wsb move is going to spiral, (no pun) decentralised apps and money is going to be the only solution to a ridiculous domino effect that we are about to see unfolding.

I truly believe we are on the cusp of a huge change in our systems, just look at the tech advancements, or the rise of China, or the massive distrust in institutions, or the collapse in biodiversity, I don't know which way it will go, but one thing is for damn sure,

We can't possibly carry on like this

[Spiral]

It could definitely have an effect on the financial system, for sure. Not necessarily apocalyptic scenarios, and of course, this appears to be a bigger story in the US than here, but in the eyes of a lot of people who might not have been as observant about it before, the stock market's mask has slipped, or rather, has been ripped off by righteous jokers on the internet with a bit of a vigilante streak taking part in a practical joke that's gotten out of hand in the most glorious possible way. Trading was stopped because hedge fund firms were literally staring at insolvency! Short position losses on GAMESTOP ALONE are estimated to be around $1.03 billion!!! Whether you view that as a billion dollars redistributed to plebs by a joke that accidentally went too far, or just funny-money waiting to blow up in everyone's face, it doesn't matter, because millions of people have just been given a highly effective and practical demonstration in how a company can be 'memed' into a stock price surge without any sensible or coherent business reason being needed at all, showing the entire house of cards upon which the financial system is built for what it is: a spectacle, and not much more. It has historically been all the affectation and high-brow ephemera that has separated elite, professional traders from everyone else, but essentially they've forever been playing the exact same game as these lunatics on reddit, just as part of a much smaller and more exclusive club.

I mean, Jesus Christ, this is a comment on reddit from a trader:

We’re HOLDING this stonk till we cum in zero gravity ORBIT This train is off the tracks going ELEVATOR UP BABY

It's beautiful. It ought to be inscribed somewhere in a museum exhibition 100 years from now. 'Stonk' isn't a typo, and the diamond emoji refers to diamond hands, as in, hard hands — we're not letting go of this stock. It's just memes all the way! Those traders' moves are having the same market-moving effect as any moves made by so-called 'reputable' firms who basically use the media to move stocks, where redditors use the organisational power of their subreddit to move stocks, and those redditors are doing it all completely legally. There's nothing different from what reddit has done to what the financial elite (for lack of a better term) do on a daily basis, but this has shone a massive light on the fiction that underpins speculative practices like short-selling, and normal people can't un-learn that, now. They've had a kind of practical demonstration of their own power. All it took was one intelligent redditor realising that Gamestop stock had been manipulated down by Wall Street through aggressive short-positions over the last year, to share this insight on reddit (all legal), and to rally enough folks into harnessing the power of the meme to do something about it!

The only options now are to either regulate the more predatory speculation practices so firms don't get burned again, thus inhibiting their more unscrupulous practices; or to brute-force disenfranchise retail traders by banning it (in which case Wall Street might want to invest in some guillotine manufactures considering how that could be spun into a political movement); or to face the bloodbath of an empowered and emboldened army of plebs with the knowhow to use democratised trading platforms to build up any company as they please, but more to the point, how to use this knowledge to land serious, serious blows on predatory billionaires. It's like a digital version of the peasants revolt, so it all certainly needs a re-think, to say the least. I love democracy!!!!!

The pure speculation over how people are spending stimulus cheques really should be ignored because it's just a nonsense talking point to distract from the bigger story developing, which is that a bunch of jokers on the internet almost bankrupted multiple hedge funds out of a righteous sense of injustice at what aggressive, vampiric short-sellers were doing to Gamestop stock, and thus the company itself, and that the people losing on their bet were sooner willing to risk jail by pulling off some possibly illegal market manipulation moves than to lose any more money to people on reddit trying to make a few hundred dollars playing their game.

[Taffy on the wing]

Best explanation of what going on

https://twitter.com/avalonpenrose/statu ... 3938201600

If that's the best i don't want to endure the worst!

[MarkGreen]

I've not seen this posted yet but it is shared pretty widely on social media of a good explanation as to how this all works.

Screenshot 2021-01-29 085600.png (238.91 KiB) Viewed 3654 times

[Caballo]

Leon Cooperman, a billionaire hedge fund manager, went live on CNBC to attack the people taking part in the GME rally, having a pop at them for deigning to use their government stimulus cheques to invest in GME (which they didn't do, because they haven't received those cheques yet) ,

I've seen it reported that a lot of the reddit people are "investing" the $600 covid incentives the US has been giving them
. As it will all end in tears - Gamestop is not worth the amount people are buying these shares at - and the $600 was intended to encourage everyone to help get the US economy going again it's no wonder that the White House would like to put a stop to this re-run of "tulip fever."

So which is it then?

[GodIsADeeJay81]

https://www.google.com/amp/s/amp.usatod ... 4013736001

The cheques only started going out at the beginning of January, but not everyone qualifies and its probably a fair assumption the system is quite slow.

I'm less inclined to believe a whinging billionaire who's upset he's getting his arse handed to him.

[Paul Waine]

So which is it then?

A good question. But, you don't need to have the check (american spelling) in your hand or your bank account before you can spend the money.

The Times reports on yesterday's events.

Investor fury as brokers block Gamestop trading
Prices sink after platforms call halt amid alarm at volatility

Tom Howard, Callum Jones
Friday January 29 2021, 12.01am, The Times

Shares in Gamestop and other companies touted by amateur traders on Reddit fell sharply yesterday after online trading platforms restricted dealings, sparking a fierce backlash.

Gamestop shares closed down 44.3 per cent in New York while the cinema group AMC Entertainment fell by 56.6 per cent, Blackberry 41.6 per cent and Nokia 28 per cent.

Trading in Gamestop, the video games retailer, was particularly volatile. It fell 35 per cent at the start of trading before recovering to a 33 per cent gain and then falling sharply again.

Gamestop has been at the centre of extraordinary trading on Wall Street in recent days. A collection of amateur traders communicating via a group called Wallstreetbets on the social media website Reddit have driven up the price of stocks that hedge funds have bet against, including Gamestop, inflicting heavy losses on what they see as the financial establishment.

Shares in Gamestop have risen more than 1,000 per cent since the start of the year. The rally has led to hedge funds suffering losses of more than $70 billion on their short positions, which is the method used to bet against the companies, according to data from Ortex.

The share price falls yesterday were sparked by Robinhood, a popular trading app among millennials in America, announcing that it was stopping the purchase of certain options in Gamestop and other companies as well as increasing the deposit needed to buy others. Robinhood said it had made the move “in light of the recent volatility”.

Two lawsuits have already been filed against Robinhood amid anger at the restrictions from amateur traders and politicians, Bloomberg reported. Around 56 per cent of Robinhood customers own some sort of stake in Gamestop. Other platforms also brought in curbs on trading.

Alexandria Ocasio-Cortez, a Democratic congresswoman, said: “This is unacceptable. We now need to know more about Robinhood’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the financial services committee, I’d support a hearing if necessary.”

Her comments, made on Twitter, drew widespread support. Elon Musk, the Tesla boss, responded by saying: “Absolutely.” Nigel Farage, the British politician, said: “Free markets and free speech are under threat.”

After being banned from buying more shares in heavily-shorted companies, Reddit users instead took aim at silver, the price of which rose by more than 5 per cent.

On another day of dramatic developments on Wall Street, America’s top markets watchdog said that it was “actively monitoring” volatility in the country’s options and equities markets. The US Securities and Exchange Commission vowed to work with other regulators to review the situation.

Gamestop, AMC and Nokia were among the most shorted companies in the US. Shorting involves borrowing shares from a broker, selling them on the market and then buying them back at a later date, ideally at a cheaper price. The profit is the difference between what they sell them for originally and what they are able to buy them back for.

In its statement yesterday, Robinhood said: “In light of recent volatility, we are restricting transactions for certain securities to position closing only.

“We fundamentally believe that everyone should have access to financial markets. We’re humbled to have helped many people invest in the markets for the first time. And we’re determined to provide new and experienced investors with the tools and resources to help them invest responsibly for their long-term financial futures.”

Other platforms to restrict trading include Etoro, Charles Schwab, TD and Interactive Brokers.

The move to limit trading sparked fury among the Wallstreetbets Reddit group. “This is market manipulation,” one said. Another said: “Well, steal from the rich and give to the poor, unless you try to take from the rich directly, in which case the app won’t work anymore. Enjoy your hypocrisy.”

**********************************

I've not seen any information provided on the options that Robinhood stopped people buying.

The US stock markets require short positions to be identified - which is how the reddit guys saw that there were large shorts of GameStop.

[aggi]

As others have said, the thing that really prompted this was that more than 100% of the available shares had been shorted. That means if you buy up a load of shares you have a ready made customer as those hedge funds needs to buy those shares back to cover those shorts. If they don't then they start racking up charges, they can't just let them run indefinitely.

In order to keep the price going up people have to hold onto their shares but obviously you need to sell them to get that paper profit into actual cash. If you're one of the first to sell you probably won't get the best price and if you're one of the last to sell you definitely won't. At the moment over 100% of the available shares are still shorted so it may well be that the price continues to go up if the investors hold their nerve.

There is also a possibility that GameStop will issue more shares in order to generate a lot of money for the company (due to the current high share price). This would devalue those shares hold by the investors as the funds who have shorted could buy the issued shares (still at a loss, but a smaller one).

The current state of play can be seen here http://www.isthesqueezesquoze.com/ (obviously somewhat biased).

[TheOriginalLongsider]

its just a game of pass the parcel and when you get to the end , whoever is holding the parcel, instead of getting a prize loses their money.

[KateR]

I know a few people who have had the stimulus check, even a couple of weeks ago, I don't know anyone who spent it on GS.

I do know one guy on a forum I am on was ranting about Robinhood blocking his account after being with them for quite a while and that he had closed his account and asked for all funds to be transferred, that was earlier this week.

I know the hedge funds obviously never accounted for this in the risk assessments they did, it's a risky business for sure but I know a few posters on here who were adamant it was no riskier than buying a house and should never be called "gambling" when delving into stocks.

[KateR]

I also feel maybe some do not understand what the $600 stimulus check was for, it was given to people under a certain annual wage, if memory serves it was $35,000 or there abouts. This is for everyone, whether working or not, therefore millions of working people got this check so in effect it was a bonus to them, it was not like the furlough scheme aimed at unemployed and people laid of due to the pandemic.

Therefore, people receiving said $600 could do what they wanted, many paid off or reduced credit card payments, others put towards some they wanted/needed and some but in reality a very small amount may have invested, with probably/maybe a small portion of them going into GS shares, good luck to them, many ways to try and stimulate the economy. Especially if you can turn your $600 in to thousands from wealthy companies and then have multiples of your $600 to spend elsewhere within the economy.

[Danieljwaterhouse]

It's hilarious watching Wall Street crying because they're losing money in the billions when they're normally forcing others to lose money.

I hope it puts some of the traders out of business.

I see that one of the apps that allows the general public to dabble has now stopped people trading on specific stocks and its also come out that they let someone else see all the trades juse before they happened so it allowed them a chance to get in there first, both of which breaks the rules I'm sure.

Other companies are also seeing a massive increase in their share prices as a result.

Hasn't Bidens new treasury secretary gotten involved too?


So long as the common people sell at the right time this could be a massive lesson for Wall Street.

Who’s buying at that position?

[Dante.El.Chunk]

Who’s buying at that position?

The original short sellers, they owe a share to whoever leant it to them, so their choice is quickly becoming, either they stay stuck in this asset for potentially years, or cut their losses.

This is the sort of trick employed by them to scare day traders away from certain stocks, the tables are well and truly turned.

EDIT grammar

[KateR]

no one will buy at the ~700 X multiplier, potential to go chapter 11, admit you owe the price for borrowing and agree to pay that back and come out of Chapter 11 new and whole, might even have to pay less than the actual borrowed price, soon as someone does that there will be a fire sale

[Danieljwaterhouse]

The original short sellers, they owe a share to whoever leant it to them, so their choice is quickly becoming, either they stay stuck in this asset for potentially years, or cut their losses.

This is the sort of trick employed by them to scare day traders away from certain stocks, the tables are well and truly turned.

EDIT grammar

If you’re in, you’re in for the haul. The moneys there for the taking.

[Spiral]

The Man, the Myth, the LEGEND!!!

The sentient set of 100 tonne brass balls who started all this...DeepF***ingValue

https://www.wsj.com/articles/keith-gill ... 1611931696

[Spiral]

A new narrative that might be forming and is being pushed by the b@stards in the media and which might become one of those distractions I mentioned in about post 8 or something of this thread is how the losses suffered by hedge funds are being covered by them dumping strong companies, which is having a drag on the stock market as a whole and impacting pension funds. Just wait, you'll see talking heads in the media yapping about how this will drag on the pension funds, pension insurers, and so on and so on all the way down. They'll attempt to guilt trip the retail traders into selling, because the hedge funds who lost their bet NEED the price to drop. Redditors who just like the stock, honest, are going to be scapegoated, I'm sure of it, for doing nothing more than holding onto a stock they like, when in actual fact it's the chancers on Wall Street simply losing a game they invented the rules of who are dragging pension funds down with them because they doubled down on their stupid gamble at an earlier point, only to find retail traders to be more resilient than anyone could possibly have imagined. Do hedge funds think about pension funds or people's welfare in general when they're gambling on a company's demise and hammering the last nails into its coffin? Do they f.uck. Like I said earlier in the thread, people start questioning the morality of this system, it isn't long before people start having distractions thrown in their face. DFV is holding, and so is the line. He's Leonidas!

[Dante.El.Chunk]

A new narrative that might be forming and is being pushed by the b@stards in the media and which might become one of those distractions I mentioned in about post 8 or something of this thread is how the losses suffered by hedge funds are being covered by them dumping strong companies, which is having a drag on the stock market as a whole and impacting pension funds. Just wait, you'll see talking heads in the media yapping about how this will drag on the pension funds, pension insurers, and so on and so on all the way down. They'll attempt to guilt trip the retail traders into selling, because the hedge funds who lost their bet NEED the price to drop. Redditors who just like the stock, honest, are going to be scapegoated, I'm sure of it, for doing nothing more than holding onto a stock they like, when in actual fact it's the chancers on Wall Street simply losing a game they invented the rules of who are dragging pension funds down with them because they doubled down on their stupid gamble at an earlier point, only to find retail traders to be more resilient than anyone could possibly have imagined. Do hedge funds think about pension funds or people's welfare in general when they're gambling on a company's demise and hammering the last nails into its coffin? Do they f.uck. Like I said earlier in the thread, people start questioning the morality of this system, it isn't long before people start having distractions thrown in their face. DFV is holding, and so is the line. He's Leonidas!

Sec have already said they intend to Investigate and have stated their duty is to the retail traders, several members of of the government from both aisles stated support For retail traders, its all but over surely?

[RVclaret]

Spiral, sorry that’s absolutely rubbish.

GameStop have got absolutely nothing going for them, they closed over 400 stores due to the pandemic! Think of GAME in the U.K. who have been struggling for years now. It’s only a matter of time before these companies go bankrupt.

Now, do you think hedge funds, who (sorry to say it) have employees 10x more intelligent than the average person on the street and forum, haven’t done their research on stocks like GameStop? There is a reason why they are short. Is it hedge funds fault that GameStop have a bad business model? I even saw they are now trying to sell other items such as clothing on their website, who are they gonna compete with, Amazon? Having said all of that some of the funds who were over leveraged on some of these stocks, well that’s their own fault.

Short sellers take on far more risk than simply buying the stock, did you know that? The financial markets are designed for people to TRADE, did you know when you buy a stock the broker has to match it with a seller? Redditers don’t ‘just like the stock’ they have a colluded to an illegal ‘pump and dump’. I wouldn’t be surprised to see the SEC step in and take action on the amount of unlicensed financial advisors on these forums/online.

[Dante.El.Chunk]

Spiral, sorry that’s absolutely rubbish.

GameStop have got absolutely nothing going for them, they closed over 400 stores due to the pandemic! Think of GAME in the U.K. who have been struggling for years now. It’s only a matter of time before these companies go bankrupt.

Now, do you think hedge funds, who (sorry to say it) have employees 10x more intelligent than the average person on the street and forum, haven’t done their research on stocks like GameStop? There is a reason why they are short. Is it hedge funds fault that GameStop have a bad business model? I even saw they are now trying to sell other items such as clothing on their website, who are they gonna compete with, Amazon? Having said all of that some of the funds who were over leveraged on some of these stocks, well that’s their own fault.

Short sellers take on far more risk than simply buying the stock, did you know that? The financial markets are designed for people to TRADE, did you know when you buy a stock the broker has to match it with a seller? Redditers don’t ‘just like the stock’ they have a colluded to an illegal ‘pump and dump’. I wouldn’t be surprised to see the SEC step in and take action on the amount of unlicensed financial advisors on these forums/online.

Are you for real? You are the first person I have seen try to defend the shorting over class. Risk isn't increased by adding zeros to a position, it is proportionate to net worth. I'd argue the literal millions of people it has taken to stick it to one of the most unethical and Downright useless members of our society, is evidence of a system that isn't serving the majorities Interests.

This is the first time in what feels like forever that there is an apolitical unity. This moment is to be cherished.

I'd love to hear a strong argument to change my mind, sad to say this wasn't it. Selling tshirts..... Yeah they must deserve to perish. Not surviving a pandemic, must be their fault.

Gamestop has been struggling for years and the main reason is games as a service and the Consoles having digital stores that can and do undercut the retailers. Game nearly went bust too and are only on existence because of a big bank buyout

These guys aren't your friends, I wonder why you defend them?

You want to talk risk? Go talk to a fireman.

[Spiral]

Spiral, sorry that’s absolutely rubbish.

GameStop have got absolutely nothing going for them, they closed over 400 stores due to the pandemic! Think of GAME in the U.K. who have been struggling for years now. It’s only a matter of time before these companies go bankrupt.

Now, do you think hedge funds, who (sorry to say it) have employees 10x more intelligent than the average person on the street and forum, haven’t done their research on stocks like GameStop? There is a reason why they are short. Is it hedge funds fault that GameStop have a bad business model? I even saw they are now trying to sell other items such as clothing on their website, who are they gonna compete with, Amazon? Having said all of that some of the funds who were over leveraged on some of these stocks, well that’s their own fault.

Short sellers take on far more risk than simply buying the stock, did you know that? The financial markets are designed for people to TRADE, did you know when you buy a stock the broker has to match it with a seller? Redditers don’t ‘just like the stock’ they have a colluded to an illegal ‘pump and dump’. I wouldn’t be surprised to see the SEC step in and take action on the amount of unlicensed financial advisors on these forums/online.

Yes, daddy, I did know that. Keep patronising me. I want more.

Gamestop having 'nothing going for them' is a possibly spurious claim, but one I'm not really bothered about contesting because you're missing the actual point that has been made earlier in the thread, that the aggressive moves made over the last year by short sellers manipulated the GME price down to artificially low levels. And yes, Enron, and credit default swaps, and other big short positions which were risky but piggy backed off bad business practices, I'm aware how this works, thanks. But it's because of the intelligence of a redditor whose game is in seeking long term value — who researched the stock, noticed almost all trades over long time frame involved short positions, and saw a red flag — who publicised this fact, that we're where we are today, and the way this information was disseminated is not illegal. If discussing a stock and giving your thoughts on it in a live interview on CNBC is legal, then so is standing on the corner of the street outside that building in which the interview is being filmed and screaming about a stock to anyone who'll listen, and if it's legal to scream about a stock on the corner of a street, then it's legal to do so on a public forum. You're also missing the point that all stocks are memes. An idea of value, transient, not fused to anything material. The demand for GME is high because...well...it doesn't matter the reasons. Fact of the matter is, demand is high. Whether that's because there's value in Gamestop, (there isn't) or because reddit are at this point motivated to hurt Wall Street matters not a jot. I can't believe you missed the sarcasm in the word "honest", after I posted "like the stock". That's kind of essential to the subtext of what I was posting about the motivations of the retail traders.

I noticed earlier in the thread that you mentioned you work in finance, in the post where you gave one of the most hilariously inept and useless explanation of hedging I've ever seen considering you were explaining it to a layman, but with that in mind I can't help but think you're taking some of what I've said about hedge funds personally?

[Spiral]

Sec have already said they intend to Investigate and have stated their duty is to the retail traders, several members of of the government from both aisles stated support For retail traders, its all but over surely?

Wouldn't be surprised to see a bail out, followed by a lot of angry people on reddit looking for their next scalp.

[RVclaret]

I didn’t mean to sound patronising in my post unlike the majority of yours on this thread, however, you’re attack on hedge funds in general wasn’t entirely warranted. Are there some ‘bad guys’ in the industry? Absolutely. But to paint them all with the same brush isn’t fair IMO.

Back on point, it may be controversial but I believe short selling is a really useful tool to find out price and root out rubbish. Why would you want your pension fund investing in these companies?

Btw I don’t take anything personally, working in finance and dealing with retail clients everyday - it’s like water off a ducks back. Just here to add some balance.

[tim_noone]

I didn’t mean to sound patronising in my post unlike the majority of yours on this thread, however, you’re attack on hedge funds in general wasn’t entirely warranted. Are there some ‘bad guys’ in the industry? Absolutely. But to paint them all with the same brush isn’t fair IMO.

Back on point, it may be controversial but I believe short selling is a really useful tool to find out price and root out rubbish. Why would you want your pension fund investing in these companies?

Btw I don’t take anything personally, working in finance and dealing with retail clients everyday - it’s like water off a ducks back. Just here to add some balance.

I'm not clever enough to understand most of this Thred....but does it relate to What the so called "essex" boys did in making tens of millions on buy fuel cheap and selling massive? Curious.

[ClaretMoffitt]

Im a couple of tons in on BB, AMC, NOK and of course GME


I

WILL

HOLD

UNTIL

MOON

[Taffy on the wing]

I've not seen this posted yet but it is shared pretty widely on social media of a good explanation as to how this all works.

Screenshot 2021-01-29 085600.png

That explains it perfectly!

[Spiral]

I didn’t mean to sound patronising in my post unlike the majority of yours on this thread, however, you’re attack on hedge funds in general wasn’t entirely warranted. Are there some ‘bad guys’ in the industry? Absolutely. But to paint them all with the same brush isn’t fair IMO.

Back on point, it may be controversial but I believe short selling is a really useful tool to find out price and root out rubbish. Why would you want your pension fund investing in these companies?

Btw I don’t take anything personally, working in finance and dealing with retail clients everyday - it’s like water off a ducks back. Just here to add some balance.

I already alluded to the Valeant short/diabetes pill scam when I recommended the documentary about it on the first page of the thread, and mentioned how the shorters being framed as the heroes was an interesting perspective not usually conveyed to the general public. You're talking to me like I'm an idiot when you give me your hot takes on the merits of shorting. I've been pretty clear in stating to those interested enough to actually read my rants that the GME short was done with the intention of driving the stock down, and not to innocently and heroically call bull$hit on Gamestop's viability. I think I've also been clear enough if it matters that this — the free market reacting — is the process of over-shorted and over-leveraged hedge funds getting precisely what they deserve for their predatory practices. I'm so very sorry if in my rhetoric a bit of nuance was lost on the subject of aggressive business practices whose real life consequences produce unemployment, homelessness, hunger, and incredible pain for some of the folks in the world who typically happen to be the most honest, and least deserving of it.

[kindonesque]

Thanks Spiral for your clear and accessible explanations of Wall Street chaos. Keep it up. I was wondering how in the what Universe somebody can borrow something and then sell it on as if it were their own. If I borrowed your car and sold it to a stranger I'd soon be up before the judge. Why is it different with stocks and shares?

[Paul Waine]

Thanks Spiral for your clear and accessible explanations of Wall Street chaos. Keep it up. I was wondering how in the what Universe somebody can borrow something and then sell it on as if it were their own. If I borrowed your car and sold it to a stranger I'd soon be up before the judge. Why is it different with stocks and shares?

Hi kindonesque, back in the days when I was working I had a little knowledge of the "stock borrow lend" market, also known as "repos" aka "repurchase obligation" and "reverse repos." The same thing also applies to bonds, as well as equities.

The "rules of the game" are that the borrower posts margin to the lender, i.e. real cash is paid and adjusted at least once every day depending on the current market value of the security that has been borrowed.

So, if you were to "borrow" spiral's car under a repo agreement you would give him cash based on the value of the car on the day you borrow it. You can then sell that car in the market - with the obligation to buy the car back (or an identical car) and return it to spiral. You pay him a "rental fee" for the borrowing, plus you've already paid him an amount at least equal to the value of the car, plus every day the market moves you pay him extra cash (or get some returned if the price moves the other way). Put simply, spiral won't be too bothered if you default and don't return his car because he's already received more cash from you than it is worth in the market - and, any time you default spiral can go out and buy himself a similar car with the money you'd already put on deposit with him.

There's a technical issue in all of this as well. When a borrower "borrows" they are legally buying the equity (or bond), because they can only sell something to whoever buys it from them in the market if it is the borrower's security to sell. (No one else wants to be in a chain where all they've done is buy something that they can't be given title to).

Least, that's how all this stuff worked back in the day.

There used to be a guide to Repos and Reverse Repos on the Association of Corporate Treasurers website. I think it was published around 2004 or 2005.

None of the collateral/margin or the technical legal stuff has appeared in the media reports - at least none that I have seen.

[Paul Waine]

Some additional stuff about hedge funds: they invest other people's money, not just the proprietors/managers of the funds. High net worth investors were the original people who would put their money in hedge funds. For some time, maybe the last 10, 20 or 30 years, many of the investors in hedge funds have been pension funds. That will be one of the big reasons why the regulators speak of being concerned for the retail investors. I'm pretty sure that some of the (UK) local council pension funds place some of their funds in hedge funds. Similarly, in the US and Canada their big teachers' pension funds have money in some of the hedge funds.

As a more general point, everyone in work - and these days with compulsory pension contributions for all employees it is everyone in work - have an interest in the efficient working of the stock markets. (Yes, all workers have also an interest in their continued employment). We can and will all have different views on the value of a particular company, whether it is M&S, Tesco, Amazon, Game or GameStop. Those who think a stock is overvalued provide a valuable service to the market if they are prepared to "short" the stock, just as much as those who think the stock is under valued are prepared to buy, i.e. go "long" the stock.

And, then there are times when the market acts irrationally. That seems, to me, to be what is happening with GameStop. But, no problem a good risk manager should always be prepared to manage the unexpected and what otherwise cannot be explained in normal investment terms.

[Lowbankclaret]

I know a few people who have had the stimulus check, even a couple of weeks ago, I don't know anyone who spent it on GS.

I do know one guy on a forum I am on was ranting about Robinhood blocking his account after being with them for quite a while and that he had closed his account and asked for all funds to be transferred, that was earlier this week.

I know the hedge funds obviously never accounted for this in the risk assessments they did, it's a risky business for sure but I know a few posters on here who were adamant it was no riskier than buying a house and should never be called "gambling" when delving into stocks.

I would suggest humbly buying shares as an investment is investing.

Short or long trading is gambling and you will not find anywhere in history on here I would have advocated it. I don’t think your comment was at me, just clarifying.

As you would appreciate, the hedge funds having to sell to close the positions is why the stocks have fallen around the world and yes mine went down to.

[Paul Waine]

I'm not clever enough to understand most of this Thred....but does it relate to What the so called "essex" boys did in making tens of millions on buy fuel cheap and selling massive? Curious.

Hi tim, the "essex boys" were trading WTI futures. West Texas Intermediate (WTI) is a grade of crude oil. Delivery takes place to a massive crude oil storage location in Cushing, Oklahoma. The WTI futures contract trades on the CME (aka Chicago Mercantile Exchange). The futures contract is a monthly obligation, for example, you can buy Mar-21 or Apr-21 etc. The Feb-21 contract will have closed trading in the past few days. When a contract closes, traders must either have an equal number of buys and sells, or they must deliver or take delivery of the physical volumes at Cushing.

All standard stuff - but then covid-19 happened and the world stopped needing oil. First thing that happens when demand falls is that the price of oil falls. Some people who are holding oil, but can't sell it because no one else wants to buy it, is that they oil goes into storage. Back in April/May last year, Cushing storage was "maxed out" - there was no capacity left to put any more oil into storage. This was made known to everyone who trades oil. They would all see the price of oil falling, and falling on their screens. The expectation was that it might fall close to zero.... surely, a physical commodity cannot go negative, that if you buy oil the seller will pay you to take it away... But, that's exactly what happened on that one day last year. So, based on the reports in the media, the Essex boys (and I'd expect a number of others) were selling the oil earlier in the day, with the expectation that they could buy it back at a lower price before the market finally closed. And, that's what they did - only the buy back price was a negative price. So, they'd closed out their positions and been paid to sell the contracts earlier in the day and were paid again to buy them back before the day closed.

That last bit is the oddity. The price had never been negative before (though negative prices have happened in other commodity markets on a number of occasions, including the UK wholesale electricity market). I'm not up to speed, it's possible that the CME has looked to amend the WTO futures contract rules to make negative price more likely if there are similar events in the physical markets.

[Gordaleman]

The latest target for the 'Reddit' and 'Robin Hood' brigade is Silver. In the last couple of days the Silver price has been forced up, but it's a lot larger market and they have realised it's not as easy. Now they are targeting individual Silver mining companies, Majestic Silver for one.

I hold a couple of small mining companies on the UK AIM market, and even they have risen in the last couple of days.

Next week could get very interesting.

[Lowbankclaret]

I will try to explain in simple terms as far as I know or understand it all. The screen shot explains most of it.

You can open an FXpro account and get a credit facility. You can use real money to.
You can bet on the market or a share going up (long) down (short).
You can short a share without buying it, just use the credit facility. If you can close out your position at a lower price, you make profit without spending any money.
Thing is you can short more shares than the company have ever released.
Now if you have a level 2 trading account you can see all the short positions.

So now if you can buy enough real shares to drive up the price those in short positions have to play poker. This becomes a game of nerve. Those buying real shares are putting in real money. But if enough people buy in and drove the price up and hold the shares, those on short positions eventually have to close the position by buying shares at a big loss. That in turn drives up the price.

So the GameStop example as I understand it went something like this.
It was shorted to 140% of the amount of real shares, hence heavily shorted. It’s share price was $4 dollars a share. Plus there were not a large amount of shares, for instance RR or TUI.

The Reddit guys figured if they bought enough shares and held them the shorters would be forced to close at a big loss. And that’s what happened, 2 million Reddit users forced the short sellars into a big loss position.

A short squeeze is not new, it’s not new.

It’s just this time it’s private individuals using social media to do it.

Thing is it can work again and again because you can see the short positions on level 2 accounts.

The hedge funds don’t have a defence, because the Reddit guys are buying real shares and that cannot be predicted or seen unless you join Reddit.

The hedge funds are already writing algorithms to view Reddit and predict their next move so they can go long on that share. Some Reddit guys could lose their shirts.

[Lowbankclaret]

Just to add.
I opened an FX pro account about 15 years ago, rather than use the credit facility I put £200 in and went short on two companies, with stop losses set. Lost the £200 in 3 days and had to add £50 to pay the debt. Closed the account as I thought that’s way too dangerous.

[RingoMcCartney]

Its almost as if the Globalists have been rumbled!

[RingoMcCartney]

Max Keiser was predicting this, literally, years ago.

As he was Bitcoin.......

[Spiral]

Max Keiser's modus operandi while shilling for Russia on their state-sponsored 'news' programmes is to get in the tiny little heads of people like you and convince you that the 'system' is irredeemably f.ucked, and that drastic change is the only possible solution, where in actual fact it's only a little bit f.ucked, and is actually quite easily changed if the political will exists, but obviously that's not happening while there are enough folk like you who seem happy to form a worldview by listening to the opinions of people taking payment in very-much-NOT-British-pound-sterling.

[Lowbankclaret]

Its almost as if the Globalists have been rumbled!

The city has been rumbled and they don’t like it.

They made up the rules to make money from the little man. The little man can now see what they see and can through social media get together to turn them over. They don’t like it.

But they are writing software to turn over the Reddit users.

It’s a big game of poker, I am going no where near.

[Spiral]

The city has been rumbled and they don’t like it.

They made up the rules to make money from the little man. The little man can now see what they see and can through social media get together to turn them over. They don’t like it.

But they are writing software to turn over the Reddit users.

It’s a big game of poker, I am going no where near.

Hilarious as this all is, it's honestly just a few Wall Street firms directly affected, Melvin Capital in particular. I don't think the City has been affected, nor will it be. Big lesson from it all is that predatory shorters know they're now more visible than they'd like to be, and that they're up against not only rationally-behaving competitor hedge funds, but also lunatic social justice activists...who just like the stonk, of course.

[RingoMcCartney]

Max Keiser's modus operandi while shilling for Russia on their state-sponsored 'news' programmes is to get in the tiny little heads of people like you and convince you that the 'system' is irredeemably f.ucked, and that drastic change is the only possible solution, where in actual fact it's only a little bit f.ucked, and is actually quite easily changed if the political will exists, but obviously that's not happening while there are enough folk like you who seem happy to form a worldview by listening to the opinions of people taking payment in very-much-NOT-British-pound-sterling.

Ringo - facts

Spiral - personal abuse....

[tim_noone]

Hi tim, the "essex boys" were trading WTI futures. West Texas Intermediate (WTI) is a grade of crude oil. Delivery takes place to a massive crude oil storage location in Cushing, Oklahoma. The WTI futures contract trades on the CME (aka Chicago Mercantile Exchange). The futures contract is a monthly obligation, for example, you can buy Mar-21 or Apr-21 etc. The Feb-21 contract will have closed trading in the past few days. When a contract closes, traders must either have an equal number of buys and sells, or they must deliver or take delivery of the physical volumes at Cushing.

All standard stuff - but then covid-19 happened and the world stopped needing oil. First thing that happens when demand falls is that the price of oil falls. Some people who are holding oil, but can't sell it because no one else wants to buy it, is that they oil goes into storage. Back in April/May last year, Cushing storage was "maxed out" - there was no capacity left to put any more oil into storage. This was made known to everyone who trades oil. They would all see the price of oil falling, and falling on their screens. The expectation was that it might fall close to zero.... surely, a physical commodity cannot go negative, that if you buy oil the seller will pay you to take it away... But, that's exactly what happened on that one day last year. So, based on the reports in the media, the Essex boys (and I'd expect a number of others) were selling the oil earlier in the day, with the expectation that they could buy it back at a lower price before the market finally closed. And, that's what they did - only the buy back price was a negative price. So, they'd closed out their positions and been paid to sell the contracts earlier in the day and were paid again to buy them back before the day closed.

That last bit is the oddity. The price had never been negative before (though negative prices have happened in other commodity markets on a number of occasions, including the UK wholesale electricity market). I'm not up to speed, it's possible that the CME has looked to amend the WTO futures contract rules to make negative price more likely if there are similar events in the physical markets.

Thanks for reply..mind blowing amounts of Money made in those Dealings for no real outlay...

[Spiral]

Ringo - facts

Spiral - personal abuse....

For the sake of the thread and in the hope that it isn't deleted, I'm going to apologise for making you upset.

[RingoMcCartney]

For the sake of the thread and in the hope that it isn't deleted, I'm going to apologise for making you upset.

You over estimate yourself.

[Spiral]

You overestimate the number of words in the word overestimate.

But again, I'm sorry.

I'd done for now, because I like this thread and it'd be a shame if it were murdered.

[Lowbankclaret]

Hilarious as this all is, it's honestly just a few Wall Street firms directly affected, Melvin Capital in particular. I don't think the City has been affected, nor will it be. Big lesson from it all is that predatory shorters know they're now more visible than they'd like to be, and that they're up against not only rationally-behaving competitor hedge funds, but also lunatic social justice activists...who just like the stonk, of course.

The city has been affected, perhaps you have not noticed the FTSE dropped over 3% in 3 days and futures since Friday are down 2.3%.

In the main due to hedge funds having to sell shares to cover the 2.1 billion dollar loss due the Gamestore.

[RingoMcCartney]

You overestimate the number of words in the word overestimate.

But again, I'm sorry.

I'd done for now, because I like this thread and it'd be a shame if it were murdered.

[Lowbankclaret]

You overestimate the number of words in the word overestimate.

But again, I'm sorry.

I'd done for now, because I like this thread and it'd be a shame if it were murdered.

Spiral, just foe the idiot.